Saturday, May 30, 2009

The Driving Force of the Auto Industry

A few years ago, I was sitting in an autoshop reading a computer manual while having my car repaired. A young mechanic came up to me and told me about how he was working to become a programmer. The conversation quickly veered to how much he hated computers and how much he loved cars.

The young mechanic even confessed that he really wasn't all that good with computers or with programming.

Realizing that a good mechanic is worth far more to society than another mediocre programmer, I launched into an effort to convince the young man that he would be better off pursuing the career he loved. My central argument was as follows:

"Stop. Take a deep look at the market. How much money does the average American spend on computers each year? It has fallen to a few hundred bucks. Now ask: How much money does the average American spend on their car?"

Americans love their cars. Americans dump a great deal of money on cars.

As communication costs become negligible, it is easy to send programming jobs abroad. Mechanical work needs to be done at the location of the machines.

The smart student follows the money. The money says that mechanical industry is a better career choice than programming.

As I watch the reporting about the troubles of the car industry. I keep harkening back to the conversation I had with the young mechanic who was in the process of making a bad career choice.

The driving force behind the auto market is the huge demand for all things auto. Were GM to complete implode, there would be a hundred companies scrambling to make their way into the market as there will be huge demand for all things auto in the near future.

The auto industry is driven by a massive demand for autos. This demand will return after the credit crunch. The best thing that could happen to the auto industry would be for the dinosaur companies to break up into dynamic market hungry smaller companies.

So the bailouts aren't saving the auto industry. The primary aim of the bailouts appears to be an effort to preserve the current unions and the highly centralized command and control structure of the big three auto model.

The mantra of big auto is that the industry most be consolidated and uniform to be efficient.

This is in direct conflict with the mantra of the alternative fuels movement which claims that the uniform mono-industry is inherently destructive in that it creates global climate change. Global Warming is not about the inherent evils of CO2. It is about the cumulative effects of the one engine fits all approach to transportation.

Were GM left to implode, taxpayers would have saved billions and we likely would have seen new innovative car firms pop up in the market vacuum.

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